Can India’s crude imports sustain a strong rebound?
India’s crude imports are likely to maintain the momentum from August, with volumes last month reaching a four-month high of 4mn b/d. Robust gasoline demand recovery has been the impetus behind refiners ramping up crude runs, as more people are taking to the roads with the onset of the festive season and lifting of travel restrictions, according to research firm Vortexa’s data.
While diesel demand has been lagging, winter harvesting is expected to provide an uplift. But industrial and construction activities will need to recover further to bring diesel demand back to pre-covid levels. The good news for refiners though is that firming diesel demand in Europe ahead of winter has widened the East-West arbitrage, offering an export market for excess supplies. Stronger jet demand bolstered by a rise in domestic air travels has also lifted refining margins.
Despite interests in diversifying their crude sources, the large Brent premium over Dubai have limited Indian refiners’ purchases of Brent-linked crudes from Europe and West Africa. Over 55% (or 370,000 b/d) of the incremental crude imports last month were from Mideast Gulf, with another 40% (or 270,000 b/d) coming from the US and Mexico. While US crude arrivals to India in September is expected to be down 50% compared to August, the widening WTI – Brent differentials this month could raise buying interests from Indian refiners once again.